The River Cree Casino is on the verge of bankruptcy and is scrambling to find alternate financing to keep operating because of a funding dispute with the province, CBC News has learned.
Court documents show the casino, owned in part by the Enoch Cree band, has defaulted on a $111-million loan. The documents say the casino does not have enough money to continue operating.
"As the loans were not repaid, (the casino) is faced with a potential filing under one or more of the Bankruptcy and Insolvency Act or the Companies’ Creditors Arrangement Act and finds itself in the current situation due to Alberta’s refusal to date" to approve the release of funds.
The casino is operated by Paragon Gaming on behalf of the Enoch Cree First Nation.
In an affidavit filed in court Thursday, Paragon president Scott Menke blames the casino’s financial problems on the as yet unexplained refusal by the provincial department of Intergovernmental, International and Aboriginal Relations (IIAR) to approve a new funding agreement between the province, the band and Paragon through what’s known as the First Nations Development Fund (FNDF).
"It came as a complete surprise," Paragon president Scott Menke said in a phone interview from Las Vegas. "With little or no consultation, the government could seemingly put Western Canada's most successful casino operation in a position where they are actually defaulting on a loan.
"We defaulted not because of any financial situations but because in the last year of working with the government they would not accept our current loan application again for the next five years but have continued to screw us around so we had no choice but to miss our deadline loan payment of April 16th and are now in default," Menke said.
He said that the financial agreement now being sought is exactly the same as the original agreement negotiated with the province in 2005.
"They changed the rules in the middle of the game," Menke said.
Paragon and the Enoch Cree are looking for alternate financing to keep the casino operating until they resolve the stand-off with the province.
Department spokesman Mike Deising declined to comment on the allegations contained in the court documents, which are unproven.
But he insisted the Enoch band has been treated fairly, saying they will receive about $40 million in funding this year from the province, as part of the original financial agreement. That agreement expires in October.
No explanation about problem behind funding issue
In the affidavit, Menke claims IIAR deputy minister Roxanne Benoit is simply refusing to tell Paragon and the band what the problem is with their latest proposal to refinance the casino and resort.
"While (Benoit) has indicated that IIAR will review a revised FNDF grant, she has not given any timeframe within which this will occur.
"As a result, (Paragon) is unable to access funds that it requires in order to operate the resort."
Paragon was to have repaid the $111 million loan by midnight on April 16. It was planning to refinance the debt but claims it could not, because the province refused to approve the new funding agreement. With no agreement, Paragon’s lenders refused to sign a loan-refinancing agreement that had already been negotiated.
Paragon defaulted and the lender called in the entire loan. Another bank, the Canadian Imperial Bank of Commerce, also froze $11.7 million in provincial funding it was supposed to have released to Paragon, which was, in part, needed to fund the ongoing operations of the casino. Paragon is now suing CIBC to try to get that money released.
The River Cree Casino and Resort opened in October 2006 and by June 2007 was the most successful casino in Alberta, according to Menke’s affidavit.
The affidavit says it has exceeded all financial projections and has generated about $180 million in revenue for the province, while employing about 900 people.